Stocks rise against backdrop of trade worries.
Both domestic and international stocks climbed in July, with U.S. large caps leading the pack. Market volatility was light, apart from Facebook’s big drop. Although tariff threats were still being lobbed back and forth — with some tariffs already in place — economic news was pretty good, too.
July was a positive month for stocks both in the U.S. and abroad. U.S. large-cap stocks led the way, with the S&P 500 up +3.72% for the month. Small caps were hot on their heels, closing up +3.16%. International stocks rose, too. Developed-market stocks returned +2.46% and emerging markets +2.20% (MSCI EAFE and Emerging Markets indices).
On the volatility front, it was a fairly smooth ride for stocks: The S&P 500 didn’t move up or down by more than 1% on any single day in July.
Government bonds were almost unchanged for the month, up +0.02%. Corporate bonds (which are issued by companies to raise funds), however, rose +0.72% as it became slightly cheaper for companies to borrow (Bloomberg Barclays US Aggregate and Bloomberg Barclays US Credit indices).
Events in July.
Economic news was largely positive during July. Second-quarter growth came in at +4.1%, a level not seen in four years. Jobs growth also was strong, despite an uptick in the unemployment rate. Interest rates rose slightly over the month, and the dollar was almost unchanged against a basket of foreign currencies.
This came against the backdrop of tariff threats flying back and forth across the world — especially between the U.S. and China. And some tariffs have been put into effect. For example, the U.S. has levied a tariff of more than 20% on newsprint coming from Canada and a 25% tariff on steel from most countries. The European Union has imposed tariffs of 25% on certain goods coming from the U.S. Not to be outdone, China placed tariffs of 25% on $34 billion of U.S. goods.
Trade tensions appeared to ease late in July, however, following a positive meeting between President Trump and the president of the European Commission, Jean-Claude Juncker.
Facebook grabbed headlines late in the month, falling 19% in one day. In this month’s sidebar we look at why it happened and the lessons it can teach us about the importance of a well-diversified portfolio.
What it means for you.
Your portfolio will probably be up for the month, as all major asset classes rose in July. Stocks returned more than bonds, which means the higher your percentage of stocks, the better your portfolio will have done. Remember that stocks are riskier than bonds, however. That’s why the further you are from retirement, the more risk your portfolio will likely take.
Because we build your portfolio specifically for you, the more you tell us about yourself — your goals, other retirement assets, and how comfortable you are with risk — the better we can tailor your investments to your unique situation. Please log into your Financial Engines account or call one of our advisors to make sure we have the information we need.
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